I look at that one this way... The Quality of Mercy was the story of Dr. Laura Rosen (I think that was her name) and the killer Carl Mueller. Their story ended with that episode. The alien healing device was introduced in that episode and used twice later on. However, it was just a device.

Aaahh, but TQoM introduces more than the device.

It also introduces some stuff about what telepaths can and can't do (both in terms of *can* and *are allowed*), the fact that there are consequences to the teep for doing some of them, and (probably most directly relating to the larger arc) the fact that reprogramming entire personalities *is* a doable thing.

The death of personality is most directly brought back in Gethsemane, which is tangental to the arc. However, the concept that a personality can be reprogrammed counter to the original personalities inclinations and wishes also comes up with respect to both Talia and Garibaldi. Both of those are more directly related to the arc.

In this respect TQoM is a bit like Infection. Infection introduces the idea that "organic tech" with a human stuck in the middle of it as a living component of the machine is an achievable technology. That turns out to be a major bit of foundation laying for later arc elements. TQoM introducing personality reprogramming as being achievable is similar foundation work for later.